[Note: A new campaign has been launched today called Finish Reform Right. It’s based around a letter to Obama, Pelosi and Reid, telling them what must be done to get a good bill out of conference. National organizations are signing onto the letter, and we’re asking the grassroots, folks like you and me, to sign on as well.

Click here to stand up and speak with one voice: President Obama, Speaker Pelosi and Majority Leader Reid, we must finish reform right!]

Yesterday, I discussed what needs to be fixed in terms of affordability before the final health care bill reaches the President’s desk. Today, let’s talk about insurance accountability.

Holding the insurance industry accountable has always been a key goal of health reform. In fact, one of the main promises of health reform – that you’ll never be denied needed care – is based off the sad reality that insurance companies routinely deny health care to increase their profits.

The abuses of the Wall Street-driven insurance companies are legion, and have been thoroughly chronicled here and elsewhere, but here’s a quick rundown [pdf]:

  • Insurers deny medically necessary coverage for profit
  • Insurers discriminate against women, children, older people, and sicker people
  • Insurers drop coverage when you get sick
  • Insurers reward employees for denying care
  • Insurers collude with providers to drive up prices
  • And insurers and Wall Street reward CEOs for increasing profits by using all the abuses listed above

These insurance company abuses must be stopped. And insurance companies need to be given an incentive to serve their customers as opposed to their Wall Street investors, perhaps a more important goal. This should be accomplished in two ways: Strong, enforceable insurance company regulations, and a national public health insurance option available on day one.

Insurance Regulation

Both the House and Senate bills have insurance regulations of varying strengths. The best of the two should be combined and strengthened before the bills are sent to the President’s desk.

One big difference is in the way the new health care marketplace for individuals and small businesses – the exchange – operates. The exchange is where subsidies are available for those who need help affording coverage, so it’s a crucial piece of reform. The House bill has a federal exchange, which would negotiate rates and terms with insurers for plans offered in the exchange, and could review and deny "excessive" premiums and premiums increases. The House exchange wouldn’t be able to supersede stronger state regulations on insurance, and states could set up their own exchanges if they chose, as long as they satisfied federal standards.

By contrast, the Senate bill has the states set up 50 different exchanges, run by the governors in those states, which would subject exchanges to Republican governors for implementation. Though they must conform to federal standards, state-based exchanges would be inherently weaker. It would be harder for state-based exchanges to negotiate strongly with huge national insurance companies and state exchanges would have smaller risk pools, driving up prices.

Structurally, the House’s model for the exchange is much stronger and would keep the insurance industry much more in line, though the Senate does have better transparency provisions for insurance companies to report their doings and data within the exchange. Overall, the House is the model that should be used for the final bill.

The House bill is stronger in another way: Benefit standards apply to all health care plans. In the Senate bill, benefit standards only apply to individual and small group plans, not large group plans offered by large employers. These large plans wouldn’t have to include standard services like mental health care, preventative care, maternity care, and other basics. The House bill applies these common-sense standards to all plans, a much better idea and one that should be in the final bill.

The House bill gives small businesses funding for workplace wellness programs to encourage healthy behavior both in and out of work for employees. In contrast, the Senate would allow huge variations in premiums – up to 50% difference – based on a participant’s health. This is a huge loophole, because varying insurance premiums and care based on a person’s health is something health reform is specifically trying to outlaw. Overall, the Senate version is conditional and less adequate, giving businesses less incentive to offer these life and cost-saving programs and allowing insurance companies to discriminate in these programs. The House version of these provisions should be retained.

Finally, the Senate bill includes a Patient’s Bill of Rights, a set of long-sought consumer protections. For example, the practice of requiring people to seek pre-authorization for emergency care, a contradiction of terms, would be banned. Your choice of doctor would be protected, even if you changed insurance coverage during treatment of your doctor is dropped from your insurance plan. Access to necessary specialty physicians would be guaranteed. And patients would have the opportunity to appeal coverage denials. These protections should be in the final bill.

And, it goes without saying that the enforcement of these regulations should be fully-funded, to make sure insurers can’t keep gaming the system.

A Public Option

Whether a small minority in the Senate would like to acknowledge the fact or not, a public health insurance option is essential to holding the insurance companies accountable. Without competition from an entity that doesn’t have a profit motive and isn’t Wall Street-driven, insurance companies will never truly change their ways. Without real competition, they will always find a way to screw their customers and they will keep increasing their rates, all of which will increase costs.

That’s the bottom line for a public option (or alternatives to it): Would it keep down costs? The public option does. Alternatives, like a trigger or a plan modeled after the one Members of Congress get, wouldn’t:

The public option would put a lid on insurance company rate increases.

Even the CBO – a notoriously conservative outfit – has confirmed this fact. In their analysis of the House health care bill, they concluded that the public option would keep overall insurance premiums within the health insurance exchange down.

This would work in the way you’d expect – through competition.

Say I’m one of the over 50 million people who will get health care through the exchange under the House bill. When the exchange is finally open for business, I’ll get to pick from any plan available. Likely, that will include plans from the for-profit insurance companies (one from Aetna, one from Unitedhealth, etc…), plans from the non-profits like Blue Cross Blue Shield, and the public health insurance option. Every one of those plans has to provide good benefits for me, so nobody can sell cheap but junky insurance in the exchange. And I’ll receive a fixed subsidy to help offset the cost if I can’t afford the plans.

So, let’s say the insurance companies decide to do what they always do and price their plans sky-high. That means in the exchange, every plan will have a huge price tag except for the public health insurance option, which, having no profit motive and no executives to pay, has no reason to raise prices like the private insurance companies do. Which plan do you think I’m going to choose? Given I’m getting a fixed subsidy, the public option is going to be better for my wallet. And I also know the public option is looking out for my health, not for profit, so I don’t have to be worried it will deny my care like the private insurance companies do.

Taken in aggregate, if the insurance companies keep raising their rates, all of the 50 million plus people in the exchange – 1/6th of America’s population – will choose the public option, costing the private insurance companies a huge amount of business. So what will insurance companies do? They won’t raise their rates. In fact, they’ll keep their prices low to attract business. In indeed, this is exactly what the CBO said would happen.

With private insurance pricing their plans below the public option, the public option is the one that gets to control overall prices in the exchange. No other alternative proposed would be able to do this. The latest alternative – allowing people to buy health care from the system members of Congress use – certainly doesn’t. The system members of Congress use – called Federal Employee Health Benefit Plan (FEHBP) and run by the Office of Personnel Management (OPM) – has just as much rate inflation as any other insurance market in this country, and is seeing its rates increase by over 10% next year.

Indeed, all you have to do is compare Medicare’s record of controlling costs to private insurance and you’ll see the difference.

This is the key question when it comes to the public option and its alternatives: Would it control costs? The public option – even the moderated public option currently in the House bill, with negotiated rates instead of Medicare rates – would. (The CBO estimated it would save $25 billion.) It would give us a lever we can pull to keep the insurance companies in check. A plan like FEHBP, which would be made up entirely of private insurance companies, has proven itself unable to control costs. There is absolutely nothing that would stop insurance companies from jacking up their rates, because there is no meaningful competition to be found.

There is no substitute for a public health insurance option. The Senate "substitute" certainly doesn’t work. Even though a minority in the Senate have thwarted the will of most Senate Democrats and made passing one up until now nearly impossible, that doesn’t diminish the need or the popularity of the idea.

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For health care reform to work, insurance companies need to be held accountable for their bad practices. That means they need to be strictly regulated, and there needs to be resources available so the regulations can be enforced. It also means they need to face real competition from an insurer run or accountable to the government. Insurance companies – for-profit and non-profit alike – have shown they can’t be trusted with our health. Their monopoly needs to be broken and people need to be able to choose a public option if they want – it’s only fair.

Before the final health care bill is sent to the President’s desk, these things (as well as affordability and abortion services) need to be fixed to get a health care reform bill that will work for Americans.

Today, Health Care for America Now is releasing a letter to President Obama, Speaker of the House Nancy Pelosi and Majority Leader Harry Reid. The letter, signed by dozens of organized groups working on health care, outlines what’s needed in conference. We’re asking grassroots supporters like you to sign on, too.

Head over to www.finishreformright.com and sign the letter to add your voice. The conference process is going to be a pitched battle, and it’s also our final chance to affect the bill. Today’s letter is just the start of a large campaign to win the changes we need.

So please sign the letter to Obama, Pelosi and Reid, so we can speak up together for the changes we need to see to this bill before it’s sent to the Oval Office for a signature.

(also posted at the NOW! blog)

I’m proud to work for Health Care for America Now

Jason Rosenbaum

Jason Rosenbaum

Writer, musician, activist. Currently consulting for Bill Halter for U.S. Senate and a fellow at the New Organizing Institute.

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